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Question

# How much must you deposit today into the following accounts in order to have a $\ 120,000$ college fund in $15$ years? Suppose that no additional deposits are made. An APR of $5.5 \%$, compounded annually

Solution

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The goal is to determine the starting principal if the accumulated balance is $\120000$ for $15$ years with an annual percentage rate of $5.5\%$ compounded annually.

To determine the starting principal, apply this formula:

$P=\dfrac{A}{(1+\frac{APR}{n})^{nY}}$

where $P$ is the starting principal, $A$ is the accumulated balance, $APR$ is the annual percentage rate (as a decimal), $n$ is the number of compounding periods per year, and $Y$ is the number of years.

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